(Reuters) - Blank-check acquisition company GigCapital2 Inc has agreed to merge with UpHealth Holdings Inc and Cloudbreak Health LLC to create a digital healthcare company valued at $1.35 billion, the companies said on Monday.
The deal is the latest in a string of mergers seeking to capitalize on the growth in telemedicine fueled by the COVID-19 pandemic. Direct-to-consumer health company Hims Inc and acute care telemedicine company SOC Telemed Inc also clinched deals with so-called special purposed acquisition companies (SPACs) this year.
A SPAC such as GigCapital2 is a shell company that uses proceeds from an initial public offering (IPO) to acquire a private company, typically within two years. A merger with a SPAC is an alternative to a traditional IPO that more private companies have turned to this year.
By combining UpHealth Holdings and Cloudbreak, GigCapital2 said in a statement that it plans to create a company focused on digital care management, telehealth, digital pharmacy and technology-enabled behavioral health. The companies were confirming an earlier Reuters report on their deal.
The newly created company will generate approximately $115 million in revenue in 2020, according to the statement.
“We’re operating in the fastest growing areas of telehealth,” Chirinjeev Kathuria, co-founder of UpHealth, said in an interview. “COVID-19 has definitely accelerated our growth, but we’re not COVID-19 dependent.”
The deal comes after GigCapital2 abandoned a non-binding $880 million agreement it entered into last month to merge with Bolder Industries, a maker of recyclable plastic and rubber.
GigCapital2 decided that telehealth was a more attractive sector to focus on.
“We’ve been talking with UpHealth for many months,” said Avi Katz, founder of GigCapital2. “The company is profitable, and in the environment of COVID-19, people really wanted to see more advanced healthcare players in the public market.”
GigCapital2, which raised $150 million in an IPO in June 2019, plans to raise $160 million in form of a private investment in public equity, or PIPE transaction, to help finance the new deal, Katz said.
Reporting by Krystal Hu in New York, Editing by Sherry Jacob-Phillips and Andrea Ricci
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